Taylor Morrison, Norbord, McGraw-Hill, Sabre price to open April; Samson, Fortescue slide

By Paul A. Harris and Paul Deckelman

New York, April 1 – Wednesday may have been the first day of April – but there was no foolin’ around in Junkbondland, as the primary arena saw a busy new-deal session, according to syndicate sources.

They reported that four issuers came to market with single-tranche deals totaling $1,295,000,000 of new dollar-denominated, fully junk-rated paper, although that was down slightly from Tuesday’s total of $1,375,000,000 of such paper in two tranches.

The big deal of the day came from travel services provider Sabre GLBL Inc., which priced $530 million of secured eight-year notes via a financing subsidiary.

That deal was a regularly scheduled forward calendar offering, but the rest of the day’s activity consisted of opportunistically timed and quickly shopped drive-by transactions.

Builder Taylor Morrison Home Corp. brought $350 million of eight-year notes to market via a pair of subsidiaries.

Canadian wood-based panels producer Norbord Inc. did $315 million of new eight-year secured notes.

And the parent entity of learning solutions provider McGraw-Hill Global Education Intermediate Holdings LLC priced a $100 million add-on to its existing notes.

Taylor Morrison, Sabre and McGraw-Hill were all seen to have moved up in initial aftermarket dealings.

Away from the new deals, much of the market’s focus was on what could be considered distressed energy and natural resources names.

These included independent oil and natural gas exploration and production operator Samson Investment Co., whose bonds slid badly in heavy trading. That drop came against a backdrop of another cut in its credit ratings.

Iron ore producers like Fortescue Metals Group Ltd. and Cliffs Natural Resources Inc. were being beaten up as iron ore prices hit their lowest levels in a decade.

Coal-mining names like Peabody Energy Corp. were also getting buried.

But one coal name that was the exception to the rule on Wednesday was Alpha Natural Resources Inc., on the news that the company had bought back almost $600 million of various junk bond and convertible notes for slightly more than half of that amount.

Statistical indicators of market performance were higher across the board for a third consecutive session on Wednesday.

Sabre prices tight

Thursday's session in the new-issue market saw a heavy news volume, with drive-by deals and dealers working to clear a sizable pre-Easter calendar.

Four dollar-denominated, single-tranche deals priced to raise a combined total of $1.29 billion.

Three of the four deals came quick-to-market.

There were no upsizings.

Executions were solid, with two deals pricing at the tight ends of talk and the other two pricing on top of talk.

Sabre GLBL priced a $530 million issue of eight-year senior secured notes (Ba3/B+) at par to yield 5 3/8%.

The yield printed at the tight end of yield talk in the 5½% area and in line with early guidance, according to market sources.

Goldman Sachs was the left bookrunner. Morgan Stanley, BofA Merrill Lynch, Deutsche Bank, Natixis, Mizuho, TPG and Lion Tree were joint bookrunners.

The Southlake, Texas-based travel services provider plans to use the proceeds to redeem all $480 million of its outstanding 8½% notes due May 15, 2019, with any excess proceeds to be used for general corporate purposes.

Taylor Morrison at tight end

Taylor Morrison Communities, Inc. and Taylor Morrison Holdings II, Inc. priced a $350 million issue of non-callable eight-year senior notes (B2/BB-) at par to yield 5 7/8%.

The yield printed at the tight end of yield talk in the 6% area.

Citigroup and Credit Suisse were the joint physical bookrunners for the debt refinancing deal. J.P. Morgan, Deutsche Bank and Goldman Sachs were the joint bookrunners.

Norbord drives through

Norbord priced a $315 million issue of non-callable eight-year senior secured notes (Ba2/BB-) at par to yield 6¼%.

The yield printed on top of yield talk.

RBC was the left bookrunner for the debt refinancing deal. BofA Merrill Lynch was the joint bookrunner. Scotia was the junior joint bookrunner.

McGraw-Hill taps PIK toggles

McGraw-Hill Global Education Intermediate Holdings priced a $100 million tack-on to its senior PIK toggle notes due Aug. 1, 2019 (Caa1/B-) at 99.101 to yield 8.748%.

The reoffer price came on top of price talk.

The notes pay a cash coupon of 8½%, which steps up by 75 basis points to 9¼% for PIK payments.

Credit Suisse, Morgan Stanley, BMO, Jefferies, Nomura and UBS were the joint bookrunners for the dividend deal.

Talking the deals

Looking toward the Thursday session, Murray Energy Corp. set price talk in its $1.55 billion two-part offering of second-lien senior secured notes (B3/B-).

A tranche of five-year notes is talked to yield 10¼% to 10½%. A tranche of eight-year notes is talked to yield 10¾% to 11%.

Tranche sizes remain to be determined.

The deal also underwent covenant changes.

Deutsche Bank and Goldman Sachs are the joint bookrunners.

Radio One Inc. talked its $350 million offering of seven-year senior secured notes (B2/B) to yield 7¼% to 7½%.

Credit Suisse has the books.

Interval Leisure Group talked its $300 million offering of eight-year senior notes (Ba3/BB-) to yield 5½% to 5¾%. Official talk comes tight to earlier guidance in the high 5s, according to a trader.

Wells Fargo is the left bookrunner. BofA Merrill Lynch, PNC and SunTrust are the joint bookrunners.

Also in the market with a deal is Hexion Inc., which plans to sell $315 million of five-year first-priority senior secured notes due 2020 (B3/CCC+).

The initial time table had that deal pricing as early as Wednesday, but no terms were available at press time, according to a market source.

No formal talk has surfaced, the source added, adding that initial guidance has the deal coming with a yield in the 9¼% area.

JPMorgan, Citigroup, Deutsche Bank, Goldman Sachs, UBS, BofA Merrill Lynch, Credit Suisse and Morgan Stanley are the joint bookrunners.

UPC upsizes euros

UPC priced an upsized €600 million issue of 12-year senior secured notes (Ba3/BB) at par to yield 4% on Wednesday.

The debt refinancing deal was upsized from roughly €414 million after having been previously downsized from €600 million following the upsizing of the concurrent dollar-denominated tranche of 5 3/8% senior secured notes due Jan. 15, 2025 (Ba3/BB) to $800 million from $600 million.

As reported, the dollar-denominated notes priced at par late Tuesday.

The euro-denominated 4% notes priced at the tight end of the 4% to 4 1/8% yield talk.

JPMorgan, Credit Suisse, ING, Morgan Stanley, Nomura and Scotia were the joint bookrunners.

New deals move up

In the secondary realm, a trader said the new dollar-denominated UPC bonds were being quoted around a 101½-to-102 bid context – although he himself had not seen much in the way of actual trading in the Amsterdam-based cable, internet and phone service provider’s paper.

He meantime saw Tuesday’s other issue – Arlington, Va.-based domestic and global power producer AES Corp.’s 5½% notes due 2025 – off by 1/8 point, ending at 98 7/8 bid, on “pretty good volume.”

A market source at another desk also saw the bonds down by 1/8, at 98 7/8, on volume of more than $15 million.

The company had priced its quick-to-market deal at 99 on Tuesday to yield 5.631%, and the notes had initially traded right around their issue price.

But AES was pretty much the exception to the rule, with new and recent deals mostly seen better.

The Taylor Morrison 5 7/8% notes due 2023 had moved up to 101 bid by the close, versus their par pricing level. A trader saw over $14 million of the Scottsdale, Ariz.-based homebuilder’s new bonds trading around.

A market source said that the Sabre GLBL 5 3/8% senior secured notes due 2023 had likewise firmed to 101¼ bid, up from a par issue price, on robust trading volume of over $10 million.

And one of the traders pegged the new McGraw-Hill bonds at 100½ bid, 101½ offered.

That was well up from the 99.101 level at which the New York-based educational materials and learning solutions provider had priced the add-on to its existing $400 million of the notes.

Going back a little further, Rite Aid Corp.’s 6 1/8% notes due 2023 had pushed upward by 1 full point to 103¾ bid, with over $56 million of the Camp Hill, Pa.-based Number-Three U.S. drugstore chain operator’s new paper having changed hands.

Rite Aid priced $1.8 billion of the notes at par on March 19. They promptly moved above the 101 bid levels and have continued to firm in subsequent days.

Energy names take a beating

Away from the new deals, a trader said that “it looks like our old favorites, the oil names,” were the dominant feature of Wednesday’s market, mostly trading on the downside.

And no issue traded down as far, or on as much volume, as Samson Investment’s 9¾% notes due 2020.

“That one got ugly pretty quickly,” he said of the Tulsa, Okla.-based energy E&P’s issue, which dropped about 5 points on the session to trade in a 15½-to-17½ bid context.

More than $55 million of the notes were traded.

He noted the fact that as late as last September, “they were still a little above par,” deteriorating badly over the next six months in line with the overall energy sector downturn, spurred by fallen crude prices.

“Aren’t you glad you didn’t invest in that one?” he quipped.

The slide coincided with the news that Standard & Poor’s had cut company parent Samson Resources Corp.’s corporate credit to CCC- from CCC+, dropping its revolving credit facility to CCC+ from B.

Samson Resources’ second-lien debt fell to CCC- from CCC+, while Samson Investments’ unsecured notes were sliced to C from CCC-.

The outlook is negative.

The downgrades reflect a belief that the company could restructure its debt, reorganize under Chapter 11 of the bankruptcy code or miss an interest payment without unanticipated significantly favorable changes in the company’s circumstances, S&P said.

Other oil names were also seen lower on the day, even as world oil prices rebounded; West Texas Intermediate for May delivery gained around $2.50 per barrel to close at $50.09 on the New York Mercantile Exchange, a gain of more than 5%, while Brent crude jumped 3% to $57.10.

Crude prices got a boost from a U.S. government report indicating that domestic output last week had fallen.

The continued failure so far to reach a deal with Iran curtailing its nuclear program – as the March 31st deadline came and went – was also seen as positive for oil prices, since international sanctions on Iran’s oil remain in place for now.

Even so, names such as Linn Energy LLC lost ground; its 6½% notes due 2019 were off by more than 1¼ points at 82¾ bid, on more than $10 million of volume.

Iron ore credits tumble

Among the iron ore producers, “FMG was getting slaughtered,” a trader said, referring to Australian miner Fortescue Metals Group.

Its 6% notes due 2017 lost 2¼ points to end at 96½ bid, another market source said, counting more than $43 million of the credit having traded.

Its 6 7/8% notes due 2018 were the big losers on the day, dropping some 5½ points to close at 93 bid on turnover of more than $23 million.

The company’s 8¼% notes due 2019 were almost as bad, falling an even 5 points on the day to finish at 80 bid, on volume of over $19 million.

U.S.-based sector peer Cliffs Natural Resources 8¼% notes due 2020 dropped two points to 92 bid on volume of more than $18 million.

The Cleveland-based company’s 5.95% notes due 2018 nosedived by 5½ points to 72½ bid, with over $10 million traded.

The iron ore names were cratering after prices for the commodity fell below $50 per ton, the lowest levels seen in at least a decade.

Coal credits mixed

Cliffs is also active in the coal business, and that sector’s bonds were seen mostly lower amid continued lower coal prices.

St. Louis-based Peabody Energy Corp.’s 10% notes due 2022 were down by some 1¾ points on the day at 86¼ bid, with more than $42 million having traded.

Its 6½% notes due 2020 dropped 1½ points to 59¼ bid, with more than $18 million traded.

But Bristol, Va.-based sector peer Alpha Natural Resources paper jumped, helped by the news that it had bought back nearly $600 million of its junk bonds and convertibles in privately negotiated transactions, for the bargain basement price of $331 million.

ANR’s 6% notes due 2019gained ¾ point to end at 28¾ bid, on over $13 million traded.

Its 6¼% notes due 2021 did even better, rising by 2¼ points to end at 27¾ bid, with over $12 million changing hands.

Sears gains on REIT deal

Away from the energy and resource names, a trader noted that department store retailer Sears’ 6 5/8% notes due 2018 gained more than 2 points on the day to end at 95½ bid.

He cited the news that the cash-strapped Hoffman Estates, Ill.-based company plans to raise more than $2.5 billion by selling 254 properties to an affiliated REIT, most of them occupied by Sears or Kmart stores, and will then lease back those locations to keep the stores operating.

Indicators stay strong

Statistical indicators of junk market performance were higher versus their levels from the day before for a third consecutive session on Wednesday; they had improved across the board on Monday and stayed strong over the next two sessions. Before that upturn, the indicators had been mixed for four straight sessions at the end of last week.

The KDP High Yield Daily index edged upward by 1 basis point to end at 71.29, its third gain in a row and eighth better finish in the previous nine sessions. On Tuesday, it had risen by 3 bps.

Its yield was unchanged at 5.39%; on Tuesday, it had increased by 3 bps, even though the yield typically declines when the index reading rises.

The Markit Series 24 CDX North American High Yield index rose by 3/32 for a second straight session on Wednesday, closing at 107 3/16 bid, 107 ¼ offered, its third consecutive advance.

The Merrill Lynch U.S. High Yield Master II index posted its fourth gain in as many sessions on Wednesday, improving by 0.021%, on top of a 0.034% rise on Tuesday. Wednesday’s rise was its ninth in the last 10 sessions.

The latest gain lifted its year-to-date return to 2.566% from 2.544% on Tuesday, although it remained down from its peak 2015 level of 3.125%, which was reached on March 2.

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